China’s property crisis has regional knock-on effects, Asean body says
- Asean office revises growth forecast for China as property market slump continues to drag on broader economy
- Concerns about China’s prospects can be applied to region, as deceleration also affects trade, tourism and investment
A regional macroeconomic surveillance body predicted on Wednesday that China’s economy will grow at a rate lower than expected three months ago, and warned its property crisis is spilling into other parts of Asia.
Growth in the world’s second-largest economy should reach 5 per cent, below a July forecast of 5.5 per cent, the Singapore-based ASEAN+3 Macroeconomic Research Office said. The office covers 10 major Southeast Asian countries plus China, Japan and South Korea.
The property crisis, China’s chief growth obstacle, worsened in the second quarter, the body’s chief economist Hoe Ee Khor said at a news conference.
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“It’s a real balance sheet problem and there needs to be a real work out between the developers and creditors,” Khor said.
China’s US$18.1 trillion GDP grew 5.5 per cent in the first half of 2023 and 3 per cent last year.
Beyond the real estate sector, manufacturing investment is holding up and consumer spending is starting to get back on track
Financial markets in Southeast Asia and surrounding countries were pressured in the third quarter by concerns about China’s economic growth prospects, the research body said in its Quarterly Update of the ASEAN+3 Regional Economic Outlook released on Wednesday.
A Chinese developer default in August “sparked concerns over the likelihood of a systemic crisis” in surrounding countries, the report said.
If China’s economy slows to 4.3 per cent growth next year, expansion of other Asian economies could fall 1.6 percentage points because of decreases in trade, investment and tourism, the report added.
The ASEAN+3 region is forecast to grow by 4.3 per cent this year, down from July’s projection of 4.6 per cent, due mainly to weaker-than-expected growth in China in the second quarter.
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Asean, a Southeast Asian region of 666 million people and a GDP of US$3.66 trillion, depends on Chinese raw material and investment for its own export manufacturing. Chinese consumers – many of whom are feeling the pinch in the property market – feed much of Southeast Asia’s tourism.
Those changes should show in China’s 2024 economic growth, Khor said, forecasting a 5.3 per cent increase in the country’s gross domestic product (GDP) next year.
“Despite the gloomy headlines surrounding China’s economic performance, we must view things in perspective,” Khor said in the outlook. “Beyond the real estate sector, manufacturing investment is holding up and consumer spending is starting to get back on track. These should have positive spillover effects across the rest of ASEAN+3.”
